Friday, October 19, 2018

This week,
USTelecom released
a new research brief titled "U.S.
Broadband Investment Rebounded in 2017." In the report, Vice President
of Industry Analysis Patrick Brogan provides evidence that broadband investment
totaled $76.3 billion in 2017, an increase of $1.5 billion (or 2%) from 2016 to
2017.

This is
significant news because it is the first time that annual aggregate broadband
investment grew in three years. As FSF scholars have noted in past blogs and
FCC filings, aggregate broadband investment declined each year from 2014 to
2016. (See here,
here,
and here.)
This likely was due to the stringent regulations imposed in the FCC's February
2015 Title II Order, which raised
costs for providers and crowded out network investment. Since the FCC repealed
the Title II public utility-style regulations in its December 2017 Restoring Internet Freedom Order (RIF
Order), the broadband industry has rebounded and aggregate capital investment
is growing again.

In a May 2018
blog, I used data collected from broadband providers' 10-K forms to create
a sample which found that broadband investment had increased significantly from
2016 to 2017. Although my sample's estimate of the industry's percentage
increase was off by quite a bit, my prediction that broadband investment would grow for the first time in three years was correct:

[W]hile my estimate of a 14% increase in capital
investment should be considered a fairly rough estimate of industry-wide
broadband investment, I am very confident that from 2016 to 2017 broadband
providers significantly increased capital investment. In fact, any increase in
broadband capital investment from 2016 to 2017 is worth noting because
investment declined in both 2015 and 2016.

When regulatory costs increase, as they did with the
imposition of the Open Internet
Order, broadband providers will invest less than they otherwise would have
absent such regulatory costs because the additional costs reduce the return on
investment. Although the RIF Order does
not take full effect until June 2018, the mere prospect of the FCC returning to
a light-touch regulatory regime, along with strong competition among many
broadband providers and technologies, appears to have played an important role
in encouraging additional capital investment throughout 2017.

Most importantly,
this news is a win for consumers because an increase in broadband
investment suggests that providers are competing to deploy new networks,
upgrade old networks, and/or develop innovative services, all of which benefit consumers.